U.S. Gulf: Granular prompt barges were reported at $180-$186/st FOB for the week, down just one dollar on the high end of the range from the prior week.
After the higher-than-expected India urea tender results were announced, one observer said NOLA price ideas might move into the $190s/st FOB. Another called the market positive. However, nothing in that range was reported by press time.
Prills continued to be called in the $200-$205/st FOB range, but sellers were looking for up to $210/st FOB for the next round of business.
Eastern Cornbelt: The granular urea market remained at $215-$230/st FOB in the Eastern Cornbelt, with the low reported in the Cincinnati, Ohio, market and the upper end out of Illinois River terminals on a spot basis. Sources noted “very little buying interest” in urea, however.
Western Cornbelt: Granular urea pricing was unchanged at $215-$225/st FOB out of most terminals in the Western Cornbelt, with the upper end reported in the Iowa market and the low in Missouri on a spot basis.
Southern Plains: The granular urea market was quoted at $210-$220/st FOB Catoosa, Okla., down $5-$10/st from last report, with $215/st FOB cited as a “common number” for dealer sales.
South Central: Granular urea was pegged at $215-$220/st FOB out of most terminals in the South Central region.
Southeast: Granular urea pricing in the Southeast was quoted at $230-$240/st FOB port terminals, down $10/st from late-August levels, with the lower numbers reported for limited tons in the Savannah, Ga., market.
India: The MMTC tender ended up with just under 3 million tons in firm and optional offers. Prices were right around where industry sources predicted. The lowest West Coast price was $203.20/mt CFR, while the lowest East Coast price was $203.81/mt CFR.
Firm offers came in at 2.7 million mt. Counter bids based on specific ports are expected by the weekend.
TransAgri provided the lowest price to the West Coast, while Dreymoor led the way on the East Coast. Other offers included $203/mt CFR from Global and $206/mt CFR from Helm. All four companies have strong ties with Iranian producers and a record of offering Iranian tons into India. The highest offer came from Hyosung of South Korea at $216/mt CFR for 25,000 mt.
The tightness of the market was evident in the offers. Just a bit more than 1 million tons was offered within a 79 cent range.
The bulk of the tonnage is expected to come from the Arab Gulf, including Iran. Freight rates from the Gulf are pegged at $10/mt, which leaves enough room for traders with Arab product to clear a small profit. The netback to China of sub-$190/mt FOB pretty much ensures that limited Chinese product will be in the mix.
The $7/mt increase in the price from the August IPL tender allowed producers to breathe a sigh of relief. Some industry watchers were afraid that at least one or two offers in the MMTC tender would be far off the mainstream thinking. If that happened, said one trader, and if the offering companies qualified in all other aspects of the tender, MMTC would have to counterbid at a level no other company could match. That, in turn, could leave MMTC able to only import a few cargoes when the need is clearly for a much larger order.
Outlier offers also run the risk of not being backed by producers, which means the offering company would have to default on the deal – leaving MMTC with nothing.
| MMTC Urea Tender – Closed September 22, 2016 | |||
| Offering Company | Quantity (mt) | US$/mt CFR | Discharge Port |
| Transagri | 45,000 | 203.20 | Pipavav |
| 45,000 | 204.20 | Mundra | |
| 60,000 | 203.20 | Rozy | |
| 45,000 | 205.20 | Hazira | |
| Global | 60,000 | 203.60 | Rozy |
| 30,000 | 206.30 | Kandla | |
| 45,000 | 204.50 | New Mangalore | |
| 45,000 | 205.40 | Pipavav | |
| 60,000 | 208.10 | Vizag | |
| Ameropa | 50,000 | 203.76 | Mundra |
| Dreymoor | 65,000 | 203.81 | Gangavaram |
| 65,000 | 205.81 | Krishnapatnam-Karaikal | |
| 65,000 | 206.69 | Rozy | |
| 65,000 | 207.47 | Mundra-Pipavav | |
| Quantum | 130,000 | 203.95 | Gangavaram |
| 204.95 | Krishnapatnam-Kakinada | ||
| 205.45 | Vizag | ||
| 205.45 | Mundra-Tuna | ||
| 205.95 | Pipavav-New Mangalore | ||
| Amber | 130,000 | 203.99 | Gangavaram |
| 204.99 | Krishnapatnam-Karaikal | ||
| 205.49 | Vizag | ||
| 205.49 | Mundra-Tuna | ||
| 205.99 | Pipavav-New Mangalore | ||
| Fertisul | 132,000 | 204.25 | Gangavaram |
| 204.75 | Krishnapatnam-Karaikal | ||
| 205.65 | Mundra-Pipavav | ||
| Comzest | 30,000 | 204.50 | Mundra |
| 204.50 | Pipavav | ||
| Ferttrade | 65,000 | 204.65 | Mundra |
| Aries | 189,000 | 204.69 | Krishnapatnam |
| 204.49 | Gangavaram | ||
| 205.79 | Kakinada | ||
| Gavilon | 62,850 | 205.15 | Krishnapatnam |
| 62,850 | 205.75 | Mundra | |
| Continental | 100,000 | 205.25 | Gangavaram-Krishnapatnam-Karaikal |
| 206.25 | Mundra-Pipavav | ||
| Swiss Singapore | 60,000 | 205.40 | Gangavaram |
| 60,000 | 207.20 | Vizag | |
| 60,000 | 207.20 | Mundra | |
| AgriComm | 62,500 | 205.50 | Krishnapatnam |
| 206.50 | Mundra | ||
| MTPL | 63,000 | 205.79 | Vizag |
| 63,000 | 206.69 | New Mangalore | |
| Allied Harvest | 65,000 | 206.00 | Krishnapatnam-Karaikal |
| 207.00 | Pipavav-Mundra-Hazira | ||
| Helm | 55,000 | 206.00 | Kakinada |
| 206.00 | Mundra | ||
| MidGulf | 120,000 | 206.15 | Kakinada |
| 205.80 | Krishnapatnam | ||
| 204.85 | Gangavaram | ||
| 205.80 | Kakinada | ||
| 210.00 | Gopalpur | ||
| 205.90 | Vizag | ||
| 206.35 | New Mangalore | ||
| 206.25 | Adani | ||
| Koch | 60,000 | 206.50 | Krishnapatnam |
| 40,000 | 205.50 | Mundra | |
| Transglobe | 60,000 | 206.50 | Karaikal |
| 205.00 | Pipavav | ||
| Dragon | 60,000 | 206.51 | Gangavaram |
| 208.01 | Mundra | ||
| 207.51 | Krishnapatnam | ||
| Keytrade | 50,000 | 207.00 | Mundra |
| CHS Europe | 60,000 | 209.00 | Mundra |
| 50,000 | 209.00 | Krishnapatnam-Gangavaram | |
| MekaTrade | 60,000 | 212.97 | Krishnapatnam |
| 213.27 | New Mangalore | ||
| 213.47 | Vizag | ||
| Hyosung | 25,000 | 216.00 | Vizag |
Middle East: The estimated netback to Arab producers from the MMTC/India tender put prices in the low-$190s/mt FOB. This number makes the producers happier than the netback of sales to Brazil, which is pegged at $188-$189/mt FOB.
Iran is expected to sell about 400,000 mt to India in the tender, and one trader said that number could be as high as 500,000 mt. Arab producers in the Gulf are then expected to supply at least an equal amount, if not more.
Sources have pointed out in the past few weeks that urea reserves have been building in Arab warehouses. Producers have shied away from tenders or other public sales that would lock in lower netbacks out of fear of dramatically lowering the formula prices for the contract sales that continue unabated.
The last public sale of Arab product was several weeks ago and was in the mid-$190s/mt FOB. Since then, contract sales have been taking place just under $190/mt FOB. Rumors of the Brazilian business – outside of existing contracts – matching the formula-based price were being countered by the producers.
Producers pointed to stronger prices in Egypt and the way the Chinese producers are able to hold their prices steady as reasons for refusing to publicly drop their prices. The results of the Indian tender now give them a face-saving way to accept lower prices than their previous public statements and protect their contracts.
Egypt had enjoyed a bump in the price for its product in the past 30 days. Sources said the stronger levels were a result of traders covering shorts for Europe. At the $197/mt FOB price Egyptian producers enjoyed, their product was not able to compete in the Indian tender, leaving them with just their traditional European and African customers.
Sources reported this week that the price in Egypt has come off. A cargo of 80,000 mt was reportedly sold at $191/mt FOB. A further drop is expected when the results of tenders in Ethiopia and Kenya are released next week.
Black Sea: Traders are selling short into Turkey, with netbacks in the low-$180s/mt FOB. The new estimates take the price into areas that will pressure producers back to their reported break-even point.
The Turkish sales come as the government is moving ahead on its earlier announcement to ban the importation and use of ammonium nitrate. This past week the government announced legislation that would make owning AN unlawful. Sources said Turkey would eventually have to step up its urea purchases to cover the losses from the AN ban.
China: Sources said the estimated netback of around $188/mt FOB that would come from the MMTC/India tender prices is not to the liking of Chinese producers. The producers have held firm that they are not interested in deals under $190/mt FOB.
Some producers, however, may be in the process of changing their minds, according to some traders. The reserves are building in the export ports, and demand for the winter buying season may not be as strong as producers had anticipated. The combination may drive some suppliers to accept lower prices just to get some cash in hand right away.
Sources reported that the enforcement of new transportation rules may also hurt urea sales. The government is implementing new regulations that limit the weight trucks can carry. If fully enforced, sources said the logistics costs for the producers and buyers will go up because overweight trucks will no longer be allowed.
Nepal: The government will close a tender for 25,000 mt of granular urea on Sept. 26. The product is to be delivered to Nepalese warehouses in special bags. Sources said China will most likely be the supplier in this tender.
Pakistan: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the government to allow the export of surplus urea to facilitate local manufacturers, who are sitting on high inventories of urea.
FPCCI Regional Standing Committee Chairman Ahmad Jawad released a statement saying Pakistan’s urea plants are running at full capacity, producing 6 million mt/y, while consumption is estimated at 5.4 million mt/y, leaving a surplus of 0.6 million mt. “If we carry forward last year’s stock, the country could easily export 1.2 million mt, which means earning $220 million dollars,” he said.
Jawad said the government could establish a mechanism to allow exports of urea through the imposition of a regulatory duty, but keep the prices subsidized for local consumption. He noted that from 1983 to 1986, when a large urea surplus existed in the country, Fauji Fertilizer Co. (FFC) began exporting, which not only stabilized the domestic urea market, but also earned valuable foreign exchange.
Bangladesh: Bangladesh will import 100,000 mt of granular urea from Saudi Arabia on state-to-state deals in late 2016. BCIC has issued an international tender for 100,000 mt of bulk granular urea in four shipments from Al-Jubail/Dammam, Saudi Arabia, to Chittagong Port. Bids are due on Oct. 3, 2016.
Bangladesh’s total demand for urea hovers at 2.7 million mt/y, while urea factories under BCIC produced 1.06 million mt in the last 2015/16 fiscal year. That production level is up 0.13 million mt from the previous year, due to the start of production by Shahjalal Fertiliser Factory, continued production by Jamuna Fertiliser Company Ltd., and other factors including proper plant maintenance and intensive monitoring to help boost production.